Another uninspiring start to the year for South Africa, yet there is hope beyond the May general elections
* South Africa’s growth: The increase in economic activity and hence the recovery in growth in South Africa didn’t quite turn out as expected in 2018. But South Africa had been poorly run for years, and the effects were bound to linger for some time. We expect economic growth for the first quarter of 2019 to have been negative, especially when looking at the performance of sectors such as manufacturing and mining. We also foresee activity picking up following the May 8 general elections. Election opinion polls suggest the ANC is going to win.
* Manufacturing and mining: Looking at high frequency data, both manufacturing and mining appear to have contracted during the first quarter of 2019, with load shedding (electricity cuts) by Eskom being a major factor in the poor performance.
* Households: Although total demand by the domestic sector increased in the fourth quarter of 2018, the high unemployment rate and low consumer confidence will continue to weigh on household spending, while government consumption expenditure will remain contained by the constrained fiscus.
* Investment: Growth in investment has been insipid since the great recession, particularly since 2014, and this has resulted in low growth over the years. The year 2018 was no different. Nonetheless, there was a significant increase in FDI during 2018, which could point to a turnaround in investment for the country. This development further suggests the success of President Ramaphosa’s investment drive, as well as perhaps more confidence in South Africa as an investment destination.
* Fiscus: The South African National Treasury is fighting an uphill battle when it comes to improving the country’s fiscus. This is due to revenue constraints resulting from a low growth environment, in the face of the difficulty of containing expenditure. We expect the government deficit to rise in 2019.
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